Will Cameron's deal with Merkel placate his party's sceptics?

German agreement to relax the working time directive is a real concession but maybe Tory backbencher

An outline is emerging of a deal between David Cameron and Angela Merkel over plans to revise the treaties that underpin the European Union.

It appears that over lunch at the end of last week, two leaders discussed the possibility of Britain refraining from serious obstruction to German plans for new rules governing how euro member countries manage their budgets. In exchange, Germany would not object to Britain seeking relaxation of the working time directive - the EU-wide regulations designed to limit the number of hours per week employees work and protect entitlements such as paid leave.

Leaving aside the question of whether Britain would really be better off or happier with a more dilute version of the directive (the UK already has the right to opt out of aspects of it) and looking purely in terms of what is diplomatically feasible for the UK, this seems like a decent compromise. Britain is not a euro member country and already has a reputation for surly reluctance when it comes to the "European project". The way the European debate has unfolded in Westminster in recent weeks has left our continental partners in no doubt that we do not see ourselves as integral players in the EU game. We want concessions on "repatriation of power" - largely so that the prime minister can show symbolic trophies to an implacably euro-phobic wing of his party - and must threaten to be obstructive in order to get them.

For countries that are in the euro and for whom the debate about fiscal integration and more rigorous rules of enforcement is existential, Britain's implicit threat to hold the process hostage must be classified somewhere on a spectrum between absurd and vindictive. David Cameron surely understands this (no doubt Merkel made it clear). He cannot veto a new EU treaty incorporating new eurozone rules without very seriously damaging Britain's diplomatic relations on the continent. What he needs is some kind of concession that is big enough to look like a loosening of ties with Brussels so that, when a revised treaty is agreed by the European Council, Tory backbenchers don't go berserk and demand a referendum on it.

The Working Time Directive is a good candidate. The Tories have always hated European influence on labour protection. Conveniently, the Lib Dems are also hostile to this particular bit of European regulation, so there is no risk of coalition tension. Merkel can be relaxed about it since it is marginal to her concerns and has no immediate bearing on budget discipline in the euro zone.

So the big question is whether it would be enough to persuade Tory backbenchers that Cameron is honouring his pledge to use treaty negotiations as the vehicle for repatriation of powers. If they sneer at this deal and insist that the Prime Minister go back for more, it would suggest that compromise is not really on their agenda at all and what they are really after is a kind of show-down that would make Britain's participation in EU structures as currently configured impossible.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.